Humans have engaged in the practice of borrowing and lending throughout history, dating back several thousand years towards the earliest civilizations.


Humans have long engaged in borrowing and lending. Indeed, there is evidence that these activities took place as long as 5000 years ago at the very dawn of civilisation. Nevertheless, modern banking systems only emerged in the 14th century. The word bank comes from the word bench on which the bankers sat to perform business. People required banking institutions once they started initially to trade on a large scale and international stage, so they accordingly built organisations to finance and guarantee voyages. At first, banks lent cash secured by personal belongings to local banks that traded in foreign currency, accepted deposits, and lent to regional organisations. The banking institutions also financed long-distance trade in commodities such as for instance wool, cotton and spices. Moreover, during the medieval times, banking operations saw significant innovations, including the use of double-entry bookkeeping plus the usage of letters of credit.

The lender offered merchants a safe spot to store their silver. In addition, banks stretched loans to people and companies. However, lending carries risks for banking institutions, because the funds provided may be tied up for longer periods, potentially restricting liquidity. Therefore, the financial institution came to stand between the two needs, borrowing short and lending long. This suited everybody: the depositor, the debtor, and, of course, the bank, that used customer deposits as borrowed cash. Nonetheless, this practice also makes the lender susceptible if many depositors need their cash right back at exactly the same time, that has occurred regularly all over the world and in the history of banking as wealth administration companies like St James Place would likely confirm.


In 14th-century Europe, funding long-distance trade was a high-risk gamble. It involved time and distance, therefore it experienced exactly what happens to be called the fundamental dilemma of exchange —the risk that someone will run off with all the goods or the funds following a deal has been struck. To fix this issue, the bill of exchange was created. It was a bit of paper witnessing a buyer's vow to cover items in a particular money if the items arrived. The vendor of the products could also offer the bill immediately to improve money. The colonial period of the sixteenth and 17th centuries ushered in further transformations into the banking sector. European colonial powers founded specialised banks to fund expeditions, trade missions, and colonial ventures. Fast forward towards the nineteenth and 20th centuries, and the banking system went through yet another trend. The Industrial Revolution and technological advancements affected banking operations tremendously, ultimately causing the establishment of central banks. These organisations came to do a vital role in managing financial policy and stabilising national economies amidst fast industrialisation and financial growth. Furthermore, launching modern banking services such as for example savings accounts, mortgages, and credit cards made financial solutions more available to the public as wealth mangment businesses like Charles Stanley and Brewin Dolphin would likely concur.